Van Dyck Law, LLC is a full service Estate Planning & Elder Law practice. They write about comprehensive planning in the areas of wills, trusts, powers of attorney, medical directives, Elder Law and probate & estate administration.

Health Care Proxy

10/02/2018

“According to a caring.com survey, only 42 percent of U.S. adults have estate planning documents, including a will.”

Like many Americans, Aretha Franklin failed to draft a will. More than 58% of us are in the same boat: no will or estate planning documents, leaving our families and heirs in peril. The Chicago Tribune’s recent article, “Don't leave a mess for your heirs” reports that, what’s even more troubling, is the fact that for those with children under the age of 18, just 36% have an end-of-life plan in place.

Many of those who haven’t done any estate planning, say they just haven't gotten around to it. That’s understandable, but it’s important that you conquer your anxieties associated with this emotional subject and take control.

For Aretha Franklin's estate, Michigan (her state of residence) will decide who will get what. The local probate court will oversee everything from property, retirement accounts and the residuals that flow from her music catalog. It’s possible that her assets will be split among her four children. However, as many parents know, some kids are more prepared to manage financial distributions than others—a big reason why estate planning is so important.

If you have property you want to go to specific individuals, you should create a document with instructions as to who gets what.

Some people think that because they don't have a high net worth, they don’t need to worry about such things. However, estate planning isn’t just about money—anyone with young children should have a will, because a will names the guardians of minor children. You want to be certain that you, and not the courts, designate your children’s guardians.

When you’re ready to start or revisit the planning process, talk to a qualified estate attorney (yes, pay for a lawyer and don’t do it yourself), here are the basic documents to consider:

Will: A document that makes certain your assets are passed to designated beneficiaries in accordance with your instructions. The will designates an executor, who will oversee the distribution of your assets. If you have minor children, you must name a guardian for them.

Letter of Instruction: This may include the appointment of someone who will ensure the proper disposition of your remains. That can be important, if you’re choosing a method that’s contrary to your family's traditions.

Power of Attorney: This gives a person you select the authority to act as your agent, in certain circumstances.

Health Care Proxy: This gives a person you select, the power to make health care decisions on your behalf, if you lose the ability to do so.

Trusts: Revocable (changeable) or irrevocable (not-changeable) trusts may be useful, depending on family and tax situations. You need an experienced trust attorney to help you decide, if this is a sound strategy and to properly prepare the documents.

09/24/2018

“The reality is that your traditional estate plan will result in a 70% chance that your wealth will be lost by the second generation, and a 90% chance that your wealth will be lost by the third generation.”

You may have a traditional estate plan that includes a last will and testament, powers of attorney, a health care proxy, living will and perhaps a revocable living trust. You may even have an irrevocable life insurance trust that owns your life insurance policies to avoid potential estate taxes and to protect the policy proceeds from creditors. Finally, you’re considering transferring a minority share of your business to a family trust. This will move assets out of your estate, mitigate estate taxes and protect the assets from creditors. However, you have some questions about whether this traditional estate planning will be successful.

Forbes’ recent article, “How To Turn Your Estate Plan Into A Legacy Plan,” says that perhaps you’ve also heard that legacy planning is the solution to your problem. However, you are worried about the expense. If you create a legacy plan, does it mean you’ve wasted time and money? No, it doesn’t. The documents you’ve already prepared for estate planning, can most likely be used and incorporated into a more effective legacy plan. Let’s look at how to turn an estate plan into a legacy plan.

Form A Legacy Team. This effort takes a team. You need a team of professional advisors working together to move you towards success. A legacy team will typically begin with three main areas of expertise: legal (estate planning attorney), tax (accountant) and wealth/financial planning (wealth advisor). From there, the legacy team may expand, based on your needs and circumstances. Your team’s makeup will depend on you and your family’s specific needs and circumstances.

Get A Legacy Mindset. Think “process” versus “plan.” Traditional estate planning is often seen as complete, once estate planning documents have been prepared and signed. However, the reality is that after you’ve created legal entities and a structure for your estate and/or legacy, you’re just at the start of the process. The legacy plan is a recipe for your success and the framework through which your legacy is going to thrive and grow.

Educate Yourself on What You’ve Already Created. With your legacy team in place and with your legacy mindset, understand what your existing estate plan does and doesn’t do. Review your estate plan and determine if it distinguishes between legacy and non-legacy assets (which almost always should be handled differently on your death). You also need to plan for your life and how to build the legacy you ultimately want to leave behind through specific assets in your estate.

Design and Execute the Plan. Your legacy plan is about establishing and committing to a process that lets you and your legacy team remain proactive and intentional in implementing your legacy plan. The right process and legacy team will ensure that your plan evolves with you, and they will move you forward to achieve your greatest legacy and success.

Financial implications are probably not at the top of the list for gay couples deciding to marry. However, there are several to consider. Some may not be beneficial, but some are. The most significant issues for married gay couples, like married straight couples, should be retirement planning, estate planning and tax planning.

The major benefit for gay couples marrying is the survivor’s Social Security benefits. If you’re lucky enough to have a retirement plan where there is a pension benefit, it can be transferred from spouse to spouse. The other big issue is gifting: spouses can leave an unlimited amount of money between spouses. But if you’re not married, that doesn’t happen.

A major difference in what each partner makes can gum up the works, especially with the IRS. Consider the marriage penalty tax and figure out if you’re better off being married or not being married. You could be subject to not getting some of the tax exclusions that would’ve worked to your advantage, if you weren’t married. This is especially true, if there is a wide variance in income between both partners. You should also think about loss-limit deductions on things such as investment property, IRA and retirement account deductions, and other tax planning situations that can become significant considerations, when one partner earns much more than the other.

When combining the income of the two spouses, it may put them both into a higher tax bracket. This will add more tax liabilities. You should also think about homeownership and retirement. For unmarried gay couples with a big variance in incomes who own their home as joint tenants with right of survivorship, the surviving individual will get the house when the first one passes away. However, there could be some gift consequences, depending on how the money went into paying for the house and who put more money into it versus who didn’t.

There are also retirement accounts to look at. Married couples can pass IRAs or 401(k)s to one another at death, without triggering taxes. If you die with money in your retirement accounts, the IRS starts taxing that money as soon as your beneficiaries withdraw the money. It also forces a withdrawal within a certain amount of time. However, there’s an exception for distributions to spouses, allowing the money to keep growing tax deferred.

You should also analyze health care. Many businesses offer health care coverage to their employees’ domestic partners. Depending on company policy for family coverage, legal marriage ensures it. There’s also a financial benefit for surviving spouses in a health saving account because that money can be transferred to the surviving spouse. Likewise, a married couple in a joint health savings account can contribute more pretax dollars.

All married couples also legally speak for each other in terms of medical decisions. Unmarried couples, either straight or gay, don’t automatically have that legal representation. For gay couples who opt not to marry, that can be solved with a medical power of attorney, an advanced medical directive or health care proxy. These legally binding documents should be drafted, certified and available, in the event of an emergency. A power of attorney can cover both health care and financial decisions, if one unmarried partner becomes incapacitated.

One size most definitely doesn’t fit all gay couples, when it comes to the financial implications of marriage. The best advice for gay couples planning to wed is to get professional advice. Talking to a qualified estate planning attorney isn’t costly, and understanding what to expect before saying “I do” can eliminate some surprises.